Thursday, September 14, 2017

Two days ago, I stepped into the world of virtual reality. It truly was amazing. If you're a Star Trek fan, as I am, putting on the Oculus Rift headset is like stepping into the holodeck.

I got to try Oculus Rift because two friends of mine have formed a startup to develop a B2B application using virtual reality. One of those friends invited me over for a demo. While I didn't get to interact with her app, I did work through Oculus Rift's usage tutorial, learning how to use my hands and head to interact with my 3-D surroundings.

The imagination that has gone into this product is absolutely incredible, from the hardware design to the mind-blowing software. First, you're in a Japanese-like room with a fireplace and sounds of water, then you're in a blank infinity room, and you can see your virtual hands in front of you, holding the controllers. An English-accented woman gives you instructions. She sounds very other-worldly. You learn to push buttons and then shoot circles simply by pressing a button and pointing your index finger. Just like being a kid again. Blam! Blam!

But the best part was yet to come - winding up in a workroom filled with electronic junk and a little robot. The robot has personality and actually seems to want you to interact with it. My friend told me to turn around. You're really in a 3-D space! The robot gives you disks to put into a 3-D printer. Out pops butterflies. You can make them land on you and fly away. The experience is enchanting and somewhat addictive. I got to build and interact with a few more items - like little rockets - before the system froze.

I've known a lot of entrepreneurs over the years, but this is the first time I've dealt with ones who are in the field of virtual reality. Now I'm hooked and can't wait to go back and experience more. I'm really looking forward to seeing my friends' app and trying it for myself.

Tuesday, May 9, 2017

If you are like most entrepreneurs, you have a big idea you want to develop as quickly as possible. While you may wonder how you will raise funding for your startup, chances are that you have not had much exposure to accounting or finance. You may even have no idea how you will keep track of the money flowing through your business. But your degree of financial literacy can make a huge difference in how much success you achieve. Here are three reasons why every entrepreneur needs to acquire at least some of the knowledge taught in an Accounting 101 course.

Reason #1 – To Know How Much Money You Make

Several years ago, when I was working with an innovative energy-efficient lighting company that wanted to raise half a million dollars, I asked the CEO why he needed to raise funding. His answer was typical: so he could grow his business. He and his partner had used home equity loans to finance their launch, and now they wanted to expand. But when I asked him how much money his company was making, he had no idea. “I have to ask my accountant,” he said.

I was stunned. How could someone who had put his home on the line and now said he needed to raise capital, not keep track of the money his business was making – or worse – maybe losing? This man was an intelligent and effective salesperson, highly capable of attracting new business. But he and his partner, who provided the technical brains, had completely outsourced the financial side of the business to their accountant. Once we had the financial statements in hand, it was obvious that the company had plenty of income and plenty of cash flow to fund a good, steady rate of organic growth. They just needed to keep plowing their earnings back into the business.

Reason #2 – To Enable You to Raise Financing

Blindly trusting an accountant or using QuickBooks to do your books yourself when you don’t have a basic understanding of accounting or of general financial management can hurt you when you try to get financing from a bank or an equity investor. In another case, I was developing a business plan for a fashion designer. Even though she kept meticulous spreadsheets detailing the amounts and the costs of every item that went into the clothes she produced – everything from imported fabric to buttons – she left her bookkeeping to her accountant. The statements he provided convinced her that she was losing money, and she desperately wanted to get a line of credit from a bank to enable her to create samples and inventory. She had to spend money on raw materials, labor, warehousing, and shipping months before she was paid by the boutiques that sold her line.

When I saw the statements, I was incredulous. Using QuickBooks, her accountant had allocated 100% of her raw materials to her cost of goods sold as they were purchased. A key principle of accounting is to match revenues and expenses. Some of those raw material costs should have been capitalized on the balance sheet. Then, as she sold her merchandise, she could match the revenues and the cost associated with producing those revenues. When we took her records from her own spreadsheets and developed fresh financial statements using Excel, it was clear that the designer had excellent gross margins and even made a net profit in some quarters. Her biggest problem was timing of receivables and payables through the different fashion seasons. She needed working capital to tide her over from season to season.

Armed with the revised statements, the designer went to her bank and received an unsecured line of credit, enabling her to produce new samples to sell at New York’s Fashion Week and to expand distribution to more boutiques.

Reason #3: To Build Financial Resources for Expansion

Contrast these last two scenarios with the following. Ed McLaughlin, with whom I coauthored a book on entrepreneurship titled, The Purpose Is Profit: The Truth about Starting and Building Your Own Business, did not have a degree in business, so he asked his accountant for instructions on how to keep track of his cash and his accounts. His company did all the bookkeeping in-house, and he took home a print-out of the financial statements at the end of each day. Ed wanted to know where his company stood because he had bootstrapped his real estate services outsourcing business, USI Companies Inc, with personal savings, and he had a young family that relied on his income.

As USI grew, Ed hired a CFO who put in more sophisticated accounting software. With the CFO in charge, Ed stopped taking statements home every day, but he continued to read his financial reports each week throughout the life of the business. Armed with such knowledge, the company was able to built a war chest of retained earnings, which they used to invest in regional and product-line expansion. Ultimately, when Ed and his partners sold USI to Johnson Controls, they realized the value of their financial discipline.

It didn’t take an MBA for Ed to understand and track his revenue, expenses, payables, and receivables. He found people who showed and explained the concepts to him, so he could grasp how much cash was flowing through his company. It is cash flow, after all, that determines whether a company can stay alive or not.

The accounting systems we use today were first developed in the Renaissance by the merchants in Venice to keep track of the trade flowing through their ventures. If you are starting a business or own a business, it will pay to invest some time in understanding the power of these systems and in developing financial literacy. If you are starting or building your own business, take the time to learn about basic accounting principles. You can get advice online, in books, or from your banker or accountant.

Friday, April 21, 2017

by Wyn
Lydecker

When Ed McLaughlin was
growing his business, United Systems Integrators Inc. (USI), he realized that
retaining his initial customers and serving them in new ways would help the
company grow faster than just focusing on new customer acquisition. It turned
out that his strategy paid multiple dividends. Experts estimate that new
customer acquisition costs can be five to 25 times more expensive than
retaining a current customer.

Your most
valuable asset

Your customers are your most precious asset. Your goal
is to build a customer base of repeat buyers who promote your business to other
buyers. An effective customer-referral system is the business equivalent of
obtaining the Golden Fleece.

If you expect to build a powerful
customer-referral system, you should have solid answers to the following
questions:

·Do you
deliver on your value proposition?

·Do you
maintain a clear competitive advantage?

·Do you
provide superior customer service?

·Do you
make doing business together a pleasurable and rewarding experience?

1.Make a cultural commitment to
superior customer service from the outset.

2.Assess, manage, and satisfy
the customer at every single interface point.

3.Provide a significant product
performance guarantee.

4.Assign a dedicated account
manager to each customer relationship.

5.Be available 24/7 to log and
address customer concerns.

6.Provide a
24-hour-response-time commitment.

7.Schedule customer engagement
forums for feedback.

8.Reward team members for
providing superior customer service.

9.Make sure that senior team
members get directly involved with customers and lead by example.

10.Develop customer-feedback
systems to stay in touch with customers and ahead of the competition.

USI's commitment to customer
service enabled USI to enjoy a 95 percent contract renewal rate, while growing
the business at a compounded annual rate of 40 percent. And they never entered
a courtroom to resolve disagreements.

When Ed was growing USI, he made listening
to his customers and adapting his business model to meet their needs top
priorities. This practice enabled the company to grow by adding product line
extensions. During the early growth stage, USI had the good fortune to land an
exclusive real estate service contract with the Olsten Corporation on Long
Island. Olsten was a high-growth temporary service firm competing with the
likes of Manpower and Kelly Services. Olsten had hundreds of offices throughout
the United States. USI was tasked with the responsibility to find, negotiate,
and open new Olsten office locations. We also built and managed Olsten’s real
estate information database.

Olsten's
needs opened up a path for a new hire Michael Casolo to leverage USI’s
business model and relationship base to sell design and construction services
to Olsten. Under Michael’s leadership, USI’s service lines expanded to include
space programming, space planning, project management, furniture management,
signage, and workplace consulting. Each service line was managed as a profit
center, which rolled up into USI’s Design and Construction P&L. USI became the first real
estate outsourcing firm to offer comprehensive design and construction
services. Michael’s contribution played a significant role in USI’s
profitability and penchant for expansion.

As you grow your business, invest the time
to listen to your customers. Your customers will tell you about their problems
and help you to figure out the best way to solve them. Then hire
entrepreneurial people who will listen, observe, innovate, and execute. Once
you have them on board, listen to their ideas, and let them lead and build in
their areas of distinctive competence. Give your leadership the opportunity to
challenge the status quo and create genuine change. They will take you to
places you never thought possible.

Tuesday, March 21, 2017

One
of my favorite co-workers was fond of saying, “It’s not what happens to you
that matters. It’s how you respond.” Jim (not his real name) was a person who
had faced many high-stress events and bounced back. He had trained the Apollo I
astronauts how to use their onboard computer just before they were killed in
the tragic fire. He had been injured in a plane crash. And he had re-engineered
a division of a corporation in such a way that he designed himself out of a job.

Jim
and I were running a small business resource center at a small college together
when a regime change resulted in our resource center being shut down and our
positions eliminated. At the time I had no idea what I wanted to do next. But Jim
offered to take me through a process of redefining my personal and professional
goals. This was the same process we had used when we were counseling other
people in transition who were thinking of becoming entrepreneurs.

If
you are in transition and need a method to help you decide where you should
head next, work on answering this series of 10 questions that Jim and I used in
our counseling. You may be surprised with the results.

Weigh Your Trade-offs

Before
we launched into the questions, we gave a preamble:

We all
know that we are on Earth for an unpredictable amount of time. We also know
that time is a non-renewable asset. For those reasons, it’s good to make sure
that we are using our time in the way that is best for us. There is no one
right way for everyone. And what was right for someone at one point can change.

As we weigh the trade-offs of life, most of us rely
on some set of basic values to guide us. From time to time it’s good to step
back and revisit those values and reset our goals. Normally, we do this at time
of transition. We’re all living with change in our personal lives, our country
and the world. All such events force us to look at life from a new perspective.
When we are in touch with our core values, that helps re-center us and gives us
strength tomake good decisions.

Your definition of success reflects your basic values. It also
provides the basis for determining your goals and the direction you will have
for your life. As you consider the different paths that might be open to you,
assess the probability of achieving success along each of those paths.

10 Questions to Ponder

1.How do you define success?

2.Consider five times you have felt that you were in
high-performance mode. What made you feel that way?

3.What situations or actions led to the highest and
lowest points of your life?

4.How do you set your short-term and long-term priorities?

5.What process did you use to set your major life
goals?

6.What were your core values at that time, and did you
base your choices on those values?

7.Do you want to transfer those values to the next stage
of your life, and how can you do that?

8.What are your goals now, and how do they differ or
align with the paths that are open to you?

9.How can you use the resources (internal and external) that
are at your disposal to achieve your goals?

10.How
will your decisions affect you, your family, and other important people in your
life?

Be Open

I spent about two weeks
thinking about the questions, writing down answers and discussing them with Jim.
In the end, I felt amazingly renewed and very sure of how I wanted to use my
talents, education, experience and time. I became confident and open to new
opportunities.

Shortly after my last
meeting with Jim, a fellow Wharton alum called to see if I would like to write
business plans for startups. He was with a business plan writing company in New
York, and it was right at the height of the dot-com boom. We had met at one of
the events run by our small business resource center. Because of the assessment
process I had done with Jim, I knew this opportunity was exactly the sort of
work I wanted and grabbed it. The work was immediately rewarding and reinforced
my realization that I love writing and working with entrepreneurs.

Where are you in your
life? Are you at a point where an introspective process could help you look at
your situation from a new perspective? Try thinking through and answering these
10 questions to redefine your goals and open yourself to a new, more fruitful
and satisfying direction.

Wednesday, February 22, 2017

When my coauthor, Ed McLaughlin, was starting his business,
USI Companies Inc, he kept his expenses as lean as possible. In the beginning his wife was the bookkeeper. She used a simple, single-entry system coordinated
with the company checkbook. But as the business expanded, Ed migrated the bookkeeping to QuickBooks and handed the financial management and record keeping to his COO.

From the time USI started, Ed took home summaries of the
company’s financials every night. He knew he would sleep better at night if he
understood exactly where the business stood. Understanding the numbers is
essential for any founder who wants his or her business to thrive. Eventually, Ed
realized that even his faithful COO couldn’t handle the complexity of the expanded
company, which had opened offices in cities across the country. It was time to hire
a CFO who could be a strategic leader. Ed likens the move to hiring “lightning
in a bottle.”

The new CFO redesigned the internal operating model,
re-engineered the accounting and financial system, put together USI’s
technology development team, and played a crucial role in facilitating USI’s
eventual sale to a Fortune 100 company.

When Should You Hire
a CFO?

CFO are expensive, and many startups and small businesses
can get along just fine using software like QuickBooks and hiring a bookkeeper,
or even an accountant to keep track of the financials, file taxes, and manage
cash flow. But eventually, a growing business can cross over the line when
stronger strategic leadership is needed, as it was at USI.

After delving into analyzing your business’s finance needs, Brown
then takes the reader through five questions the owner must ask in order to
make the right decision as to the level of financial expertise she or he should
hire. If you are a business owner or founder, Brown’s blog is well worth
reading and keeping as a reference point.

Monday, February 13, 2017

By Wyn Lydecker

Intrigued?

I learned the secret to increasing the bottom line when
developing the business plan for an Australian startup. As the COO and I went
over the key assumptions behind the financial projections, he instructed me
take out the expense I’d built in for healthcare benefits. Why? Because Australia
has a single-payer healthcare system – i.e., universal healthcare coverage.

All the money that typically goes toward employer-provided
health insurance in American companies went straight to the bottom line! Furthermore,
the Australian company’s projected path to profitability was dramatically shortened.
I was stunned.

Why should we keep in place such a high barrier to new
business formation? Why do American businesses want to keep themselves saddled
with this enormous, growing health insurance burden? In 2016, health insurance premiums
cost employers an average of $18,143 per employee. Furthermore, workers had to
contribute an average of $5,277 toward that cost, lowering their take-home pay
(Kaiser Family Foundation).

Why a Single-Payer
System Would Benefit Entrepreneurs

With a single-payer system, we could immediately lower the
cost of starting up and growing a business. We could reduce the personal cost
and risk entrepreneurs take on when walking away from employer coverage. In
fact, starting up would become far more attractive without those burdens. The
risk of shouldering out-of-pocket healthcare costs would go down. In a recent
New York Times article, small business owners complained that the current
system is unbearable. A single-payer system would be affordable for all.

·Besides the bottom-line benefit, healthcare
costs would plummet because the administrative costs would shrink significantly.
Currently, transaction costs account for one third of our health costs. Think
hospital bills are high? Fully 25 percent of the hospital costs are
administrative – think all that paperwork, negotiating with insurance
companies, etc. (pnhp.org).

·Americans are now paying an average of 10
percent of their income for healthcare premiums, deductibles, and copays, up
from six percent a decade ago. Even with Obamacare and its subsidies,
healthcare costs are hurting all of us.

·With a single-payer system, more money would
flow into workers’ wallets and stay there because they would not have to
contribute their share of the health insurance premiums or be faced with
onerous deductibles and copays.

How to Replace
Obamacare

President Trump and
the Republicans who control Congress have promised to repeal and replace the
Affordable Care Act, aka “Obamacare.” I believe it should be replaced with
a single-payer system that provides universal healthcare coverage for all.

A lot of people are afraid of a single-payer system. But
countries that have it enjoy better health and longer life expectancy.
Moreover, the other systems are more efficient. The U.S. ranked 50th
out of 55 countries for healthcare efficiency (Bloomberg).

In countries with universal care, research does continue.
And their healthcare is no more rationed than ours is – how many times has an
insurance company denied to cover a visit or procedure? How many people don’t
visit a doctor or take medicine because they cannot afford it?

Best of all, with a single-payer system, the government
would be able to exert its buying power to lower the cost of much-needed drugs.
The big pharma lobby would fight this, but the lower costs would be a boon to
our economy and to our entire population.

With universal healthcare coverage, everyone – sick or well,
young or old, rich or poor – will be covered and will pay into the system via a
tax. With everyone covered, and without the high administrative overhead, the cost
per person should be far less than employers and individuals are paying now for
their health insurance or through the taxes paid to subsidize the plans for
poor and moderate income families. Thus, the tax for universal coverage will be
more affordable than the costs we are now bearing.

Tuesday, January 24, 2017

(From Toptal's blog, The New Wave of Entrepreneurship;Photos from http://www.ablogtowatch.com, http://securityaffairs.co, http://geniusapp.com, and http://www.rakenapp.com )

I recently read a blog by Matt Swanson on the Toptal site that discussed the difficulty for innovative startups outside Silicon Valley to raise capital from Silicon Valley VCs (The New Wave of Entrepreneurship). Swanson says that Silicon Valley suffers from a closed ecosystem and accompanying tunnel vision. (I suspect this same exclusiveness is what keeps most of those VCs from funding women-owned or minority-owned businesses as well.)

He makes the point that developing the next cool app or the next iPhone is all people in Silicon Valley focus on, when instead there should be a way for entrepreneurs looking to solve problems in varying own industries in other parts of the country to have access to the capital and the brain power that is concentrated in Silicon Valley.

Swanson predicts this situation will change. I believe it already is. CB Insights says that AI deals are at an all-time high, and they are being done in 35 states. AI is only one fast-growing industry that is not just concentrated in Silicon Valley - think Real Estate Tech, FinTech, and HealthTech.

Harness Technology to Change Your Industry

Entrepreneurs come from all sorts of backgrounds and industries. But they can be uniquely successful if they can harness technology to fill a need in their field. My coauthor, Ed McLaughlin, did that with his real estate services business by starting a separate company called Sequentra. Sequentra delivered a proprietary software solution that enabled workflows, improved access to critical information, and tightened his company's link to their customers. (You can read more about it in our book, "The Purpose Is Profit: The Truth about Starting and Building Your Own Business")

How can you harness technology to create a new business in your own industry? As he says in his blog, Matt Swanson wants to help you do that.

Wednesday, January 18, 2017

When you've worked for 3 1/3 years coauthoring a book, the feeling of seeing the actual physical book offered for sale on Amazon and in brick and mortar bookstores is one of pure elation! But what makes my coauthors, Ed McLaughlin and Paul McLaughlin (pictured above), even more excited is when someone tells us that our book has actually helped them with their business. Comments like that make all the work worth it.

When we started out to create a book for entrepreneurs by entrepreneurs, we didn't realize that the endeavor would be just like starting a new business. Before we knew it, we found ourselves immersed answering a lot of the basic questions all entrepreneurs must answer:

What was our main idea for our product?

What was the purpose of our book?

Who was the target audience? (Who was going to buy and read the book?)

What unique value would we deliver?

Were we filling an unmet need?

How would we create the content and design its final form?

Who were our competitors?

How would we manufacture and distribute the book?

How would we market the book?

What other resources would we need to bring our creation to the market successfully?

These were not easy questions to answer. We spent hours discussing them and doing the homework necessary to develop our product, build an audience, and finalize and distribute the final product with the help of our publisher, Greenleaf Book Group. We not only wrote, edited, and rewrote every chapter; we also spent hours developing and executing our marketing strategy, which included feeding the social media machine, writing blogs, and developing an email list, in addition to using traditional marketing tools such as public relations.

The Purpose Is Profit

Here's a description of the book in a nutshell:

My coauthor Ed McLaughlin bootstrapped his first company, USI, grew
it into an Inc. 500 company, and 14 years later sold it to a Fortune 100
company.The book uses the full arc
of McLaughlin’s journey, including the failure of a second startup, to reveal
the essential business principles all aspiring entrepreneurs need to know,
including:

Why
distinctive competence trumps passion in selecting the business to build.

Where and
when to get funding without losing control.

How to
build an entrepreneurial brand that lasts.

Why profit
should be factored into every business decision.

How
ethical behavior breeds trust and unlocks profit.

As a special feature, the appendix includes two essential
guides: The Startup Roadmap and The Startup Funding Guide.

In the End

In the end it was worth the effort. A columnist for Entrepreneur.com wrote, "Here's a book every entrepreneur needs to read." Not only that, the book was the #1 New Release on Amazon in the New Business Enterprise category. All that made us feel pretty good.

About Me

Owner of Upstart Business Planning: I craft business plans that answer the questions investors ask most often. Co-Author of The Purpose Is Profit: The Truth about Starting and Building Your Own Business and The Startup Roadmap: 21 Steps to Profitability"

Only 1 - 2% of business plans raise funding. 60% of the plans I've done have helped owners raise capital.

I was a founder of and former board member of At Home In Darien (formerly Aging in Place+Gallivant), a nonprofit in Darien, CT.
* MBA from Wharton in Marketing and Finance.